In October 2015 we
reported on the UK's consultation
papers outlining HMRC's proposed two pronged approach to
tackling facilitators and enablers of offshore tax evasion. Since
then summary responses have been published,
draft legislation is now in train, the civil limb (at least) got a
brief mention in the 2016 Budget and just last week David Cameron
reiterated the UK's commitment to introducing a new corporate
criminal offence of facilitating tax evasion.
It may be opportune (possibly opportunistic) to point out that
at this stage, as far as we know, the Mossack Fonseca scandal has
not unearthed any companies in Guernsey, identified only 8
companies in the Isle of Man and 39 companies in Jersey. It did
however reveal 148 Mossack Fonseca connected companies in the
Our focus remains on the proposed
criminal and civil legislation aimed at tackling the facilitators
and enablers of tax evasion.
The 2016 UK Budget announced the
Government's intention to introduce new civil penalties for
enablers of tax evasion and draft legislation, within the Finance
Bill released on 24 March 2016, which is now making its way through
Draft legislation for the new corporate
criminal offence has been published and a further consultation
document is expected in early 2016. It is anticipated that it will
be finalised before the introduction of the new international
automatic exchange of information arrangements in 2017.
Impact of the consultation?
The consultation has been helpful in
narrowing and clarifying the scope of the new sanctions.
Corporate Criminal Offence
Companies will be criminally liable if an
associated person facilitates the tax evasion by another. The term
"agent" has now been ditched and replaced with
"representatives". Corporations will be liable
for all persons who provide services on their behalf (employees,
contractors, service providers) but will not be liable for those
acting entirely independently.
The consultation has clarified
application of the rule against double-jeopardy, in effect
individuals or businesses convicted for the corporate criminal
offence of failing to prevent tax evasion should not also be
subject to the civil sanction for the same offence. However, HMRC
made it clear that much will depend on the specific facts of each
case whether the rule is at risk of being breached.
It is now clear that those seeking to
reduce their risk of prosecution and penalty must have
"reasonable procedures" to prevent those
representing them from criminally facilitating tax evasion. It
would seem that the UK Government wishes to incentivise firms to
monitor the actions of their representatives.
As with any
incentive (or deterrent), its effectiveness is often linked to the
level of likely penalty that can be imposed should a breach
penalty is proposed to start at 100% of the tax evaded and
deductions may be applied in certain circumstances. In
addition, the enabler may be publicly named (and shamed) where the
tax evaded exceeds £25,000 or the enabler has deliberately
assisted 5 or more UK tax evaders during a 5 year period (although
how the 5 evaders will be calculated is yet to be determined).
A little bird
has told us that HMRC has an initial budget of £15 million to
get tackling offshore tax evasion under the proposed new offences
and penalties. This indicates that, initially at least, the
limelight is likely to fall on headline-grabbing high profile
What to do next?
responsibility is a hot topic that is not going away anytime soon.
Firms operating offshore are well advised to get ahead of the game
by implementing appropriate procedures.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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